Question

Lawn Master Company, a manufacturer of riding lawn mowers, has a projected income for the coming year as follows:

Sales					$	46,000,000
Operating expenses:
Variable expenses	$	32,200,000
Fixed expenses		7,500,000
Total expenses						39,700,000
Operating profit					$	6,300,000

Required:

1. Determine the breakeven point in sales dollars.

2. Determine the required sales in dollars to earn a before-tax profit of $8,000,000. (Round your answer to the nearest whole dollar amount.)

3. What is the breakeven point in sales dollars if the variable expenses increases by 12%? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Lawn Master Company, a manufacturer of riding lawn mowers, has a projected income for the coming year as follows: Sales $ 46,000,000 Operating expenses: Variable expenses $ 32,200,000 Fixed expenses 7,500,000 Total expenses 39,700,000 Operating profit $ 6,300,000 Required: 1. Determine the breakeven point in sales dollars. 2. Determine the required sales in dollars to earn a before-tax profit of $8,000,000. (Round your answer to the nearest whole dollar amount.) 3. What is the breakeven point in sales dollars if the variable expenses increases by 12%? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.)

Answer 1

Answer 1
Sales revenue	46,000,000
Less: variable cost	32,200,000
Contribution margin	13,800,000
Less: fixed cost	7,500,000
Net operating income	6,300,000
Contribution margin	13,800,000
Divided by: sales revenue	46,000,000
Contribution margin ratio	30%
Fixed cost	7,500,000
Divided by: Contribution margin ratio	30%
Breakeven point in sales dollars	25,000,000
Answer 2
Target operating income	8,000,000
Add: Fixed cost	7,500,000
Total Contribution required to earn target profit before tax	15,500,000
Divided by: Contribution margin ratio	30%
Sales in dollars to earn a before-tax profit of $8,000,000	51,666,667
Answer 3
Sales revenue	46,000,000
Less: variable cost (32200000+(32200000*12%))	36,064,000
Contribution margin	9,936,000
Less: fixed cost	7,500,000
Net operating income	2,436,000
Contribution margin	9,936,000
Divided by: sales revenue	46,000,000
Contribution margin ratio	21.60%
Fixed cost	7,500,000
Divided by: Contribution margin ratio	21.60%
Breakeven point in sales dollars	34,722,222